Economics: Economic Insecurity: The Long View

One in five Americans, a new report for the Rockefeller Foundation found, has experienced a decline of 25 percent or more in available household income. The typical American experiencing such a plunge will require six to eight years just to climb back to previous levels of income.

The report, which draws on a variety of Census and Federal Reserve data, notes that in 1985, 12.2 percent of Americans experienced an economic loss sufficient to render them economically insecure. During the recession of the early 2000s, the insecurity rose to 17 percent; today it is 25 percent.

The narrative arc is not reassuring.

“The ‘new normal' in each subsequent economic cycle has featured a higher level of economic insecurity,” the foundation's Web site notes.

There are many factors complicit in the increased agitation of the American middle class, from declining real wages to the three-decade erosion of pensions and health plans and the new insistence of corporate boards on reducing company matches for 401(k) plans.

Overall income and family wealth has grown during this time. But the gains are far from equal. After-tax income rose by 21 percent for the middle fifth of American households, but increased by 112 percent for the richest 10 percent of households and by 256 percent for the top 1 percent, according to Mr. Hacker's report.

With the national economy now sitting becalmed, and many indicators hinting at a downward trend, some commentators have tended to talk of psychological factors, as if to suggest that Americans need only to snap out of their funk.

This report suggests that this funk is grounded in prosaic reality far more than many want to acknowledge.

For more, see Economic Insecurity: The Long View by Michael Powell, July 23, 2010, at Exonomix Blog, New York Times, and Economic Security at Risk by Jacob S. Hacker, et al, July 2010.